The tale of two international phenomena: Migration and global imbalances |
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| Affiliation: | 1. EconomiX-CNRS, University of Paris Nanterre, France;2. BETA-CNRS, University of Lorraine, France;3. CEPII, Paris, France;1. Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree St. NE, Atlanta, GA 30309, U.S.A;2. Hanken School of Economics, P.O. Box 479, Helsinki 00101, Finland;1. Department of Quantitative Economics, School of Business and Economics, Maastricht University, Maastricht, The Netherlands;2. Faculty of Economics and Business, University of Groningen, PO Box 800, 9700 AV, Groningen, The Netherlands;3. University of Tasmania, Australia;4. CAMA, Australia;5. CIRANO, Canada;6. Management School, University of Liverpool, Liverpool, UK |
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| Abstract: | Following the dynamics of globalization, international migration has increased dramatically since the 1990s. Since migration patterns affect a country’s demographic structure—which is known to have an impact on the current account—migration is likely to explain a significant part of world imbalances. This paper tackles this issue by investigating the role played by international migration in the dynamics of global imbalances. To this end, we rely on an overlapping generations model to derive the theoretical link between international migration and the current account position. Through a series of robust estimates, we empirically investigate this relationship by relying on a large panel of developed and developing countries. Our results point to substantial effects of international migration. Specifically, we show that an increase in migration augments national savings and tends to restore the current account balance in the destination country, while it has opposite impacts in the origin country. These effects are particularly pronounced in developing economies and are attenuated by migrants’ remittances. |
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